Oil services stocks and oil ETFs were leading the pack Friday after the Organization of Petroleum Exporting Countries revealed plans to cut production, progress in the U.S.-China trade negotiations and ...

Commodities like agricultural goods and precious metals offer investors an alternative to divest their holdings. Often times, commodities march to the beat of their own drum compared to the broad market. ...

To help investors keep up with the markets, we present our ETF Scorecard. The Scorecard takes a step back and looks at how various asset classes across the globe are performing. The weekly performance is from last Friday’s open to this week’s Thursday close.

Oil prices and commodity-related ETFs bounced Tuesday on hopes of improved global growth as China considers enacting stimulus measures to prop up a faltering economy. On Tuesday, the United States Oil ...

Energy's Performance Last Week—and What's on the Agenda This Week
(Continued from Prior Part)
## Oil-tracking ETFs
Between January 4 and January 11, the United States Oil ETF (USO), the United States 12-Month Oil ETF (USL), and the ProShares Ultra Bloomberg Crude Oil ETF (UCO) rose 7.1%, 6.2%, and 14.4%, respectively. These ETFs track US crude oil futures.
USO holds active US crude oil futures, while USL holds US crude oil futures deliverable for each of the next 12 months. UCO tracks daily changes in the Bloomberg WTI Crude Oil Subindex.
USO and USL underperformed US crude oil February futures, which rose 7.6% last week. Higher oil prices can boost oil-weighted stocks. Whiting Petroleum (WLL), Hess Corporation (HES), and Callon Petroleum (CPE), the strongest oil-weighted stocks, rose 10.9%, 12.2%, and 16%, respectively, last week.
## Long-term returns and the forward curve
Between February 11, 2016, and January 11, 2019, US crude oil active futures rose 96.8% from their 12-year low. USO, USL, and UCO rose 36.4%, 41.6%, and 29.3%, respectively.
A negative roll yield, which occurs when expiring futures contract prices are lower than the following month’s futures contract prices, may have caused the lower returns. UCO’s actual and expected returns could also be different due to daily price changes.
In a cost-of-carry model, ETFs’ underperformances due to negative roll yields reflect storage costs. On January 11, US crude oil futures for delivery between February and August 2019 closed in ascending order, which could be a negative sign for these ETFs’ returns.
Continue to Next Part
Browse this series on Market Realist:
* Part 1 - The China Factor Could Drag on Oil This Week
* Part 2 - Oil’s Rise Wasn’t the Only Driver of Energy’s Score Last Week
* Part 3 - These Upstream and Oilfield Stocks Outperformed Energy Last Week

Goldman Sachs noted that rising volatility (VXX) and the potential for an additional sell-off in equities makes it bullish on gold despite the higher interest rate outlook. In a report published on November 26, Goldman Sachs reiterated its positive views on commodities, especially oil (USO) and gold. Goldman Sachs expected slower US growth to benefit gold since its appeal as a safe-haven asset increases.

To help investors keep up with the markets, we present our ETF Scorecard. The Scorecard takes a step back and looks at how various asset classes across the globe are performing. The weekly performance is from last Friday’s open to this week’s Thursday close. Despite worries about trade wars and an economic slowdown across the board, the U.S. job market is making great strides. In the last month of 2018, the U.S. economy added 312,000 jobs, nearly double the figure expected by analysts. The showing for November itself was revised up by 21,000 to 176,000. At the same time, hourly earnings increased by 0.4% in December on average compared with 0.3% expected by pundits. Such a rise in hourly earnings has not been seen since September. Meanwhile, the unemployment rate jumped from 3.7% to 3.9%, a sign the labor market is expanding and more people are joining the labor force. Amid market turbulence, Federal Reserve Chair Jerome Powell attempted to ease market concerns, saying he was aware of the risks stemmed from raising interest rates too quickly and was listening carefully to what the markets had to say. Stocks posted a strong rally this week. On Thursday, Powell spoke again, saying the Fed can be patient on monetary policy given the stable inflation. The Federal Reserve minutes revealed that policymakers have become more dovish, finally acknowledging the risks related to a slowdown in China, trade wars and political turbulence. U.S. non-manufacturing purchasing managers’ index (PMI) dropped dramatically in December, from 60.7 to 57.6, signaling a deteriorating sentiment. U.S. crude oil inventories declined by 1.7 million barrels in the week ended January 4, following two straight weeks of flat gains. Stockpiles have not seen a weekly rise since the end of November when they ended a ten-week streak of gains. U.K. economic output expanded 0.2% in November, beating expectations of 0.1%. The upbeat figure comes as the country still struggles to reach a Brexit solution, with the government and the Parliament at odds. An increasingly likely scenario is to push back the March 29 exit date to avoid chaos.

Pretty, isn’t it? Actually it is pretty ugly. Starting in December of 2007, the S&P 500 (SPY) was down a whopping 54% (yellow line) 16 months later when it bottomed in March 2009. The Nasdaq (QQQ) actually fared better during the time frame down only 48% (red line). Oil (USO) clearly did the worst down 60% in the time frame (blue line). The only thing that did well was Gold (GLD) up 18% during the time (orange line). So when people encourage you to buy gold to be defensive, that may actually work. But what about the “defensive” equities? Look, I have no idea if we are headed into a real downturn (economically) or not, just don’t listen to people telling you to shift your portfolio to defensive names. No one get rich losing 30-40% on names like this. Either sit it out, learn to short, or buy some gold. But remember advice you hear is often to help hedge funds and mutual funds “outperform”. But in a real downturn, you won’t feel better outperforming if you lose 20% less than everyone else, because you will still lose.

Lampert Ups Sears Bid by $600M With 4 Days Until Liquidation Sears (OTCMKTS:SHLDQ) again? Politics isn’t the only thing with endless back-and-forth-verge-of-catastrophe-last-minute-saves these days. It appears Sears Chairman Eddie Lampert is making another attempt to save the world’s oldest retailer. His new offer sweeten the pot by about $600 million, upping it from $4.4 billion […]
The post Market Morning: Sears Rescued? Total Toyota Recall, Fed Gets Dovish, Aramco Opens Books appeared first on Market Exclusive.

Oil Exports and Downstream Stocks Might Start 2019 on a High Note
## Brent-WTI spread
On January 7, Brent crude oil March futures settled at ~$8.81—higher than WTI crude oil February futures. On December 31, the spread was ~$8.39.
On December 31–January 7, Brent crude oil March futures rose 6.6%—20 basis points less than the rise in WTI or US crude oil February futures. In the trailing week, the United States Brent Oil ETF (BNO) has risen 6.1%—40 basis points less than the rise in the United States Oil ETF (USO). BNO tracks Brent crude oil futures, while USO follows US crude oil futures.
Easing concerns of increased supply outside the US might be behind WTI crude oil’s underperformance compared to Brent crude oil.
## US crude oil exports
The above chart shows the broadly positive relationship between US crude oil exports and the Brent-WTI spread since December 2015. Exports seem to follow the Brent-WTI spread with a lag. When the US lifted the ban on US crude oil exports in December 2015, US crude oil production started rising. US crude oil production rose ~27.5% to ~11.7 MMbpd (million barrels per day) in the week ending on December 28.
In the same week, US crude oil exports fell by ~0.7 MMbpd to ~2.23 MMbpd. US crude oil exports rose by ~0.7 MMbpd year-over-year. If the Brent-WTI spread expands due to easing concerns about rising supply outside the US, crude oil exports might gain.
## Brent-WTI spread and US energy companies
While a widening Brent-WTI spread is good for US refiners and US oil exporters, it’s a disadvantage for US oil producers selling in the US market. A narrowing spread has the opposite impact. On October 19, the Brent-WTI spread expanded to $10.66—the widest level since June 8. On October 19–January 7, the Brent-WTI spread contracted by ~$1.8, while the VanEck Vectors Oil Refiners ETF (CRAK) fell 13.5%.
Phillips 66 (PSX) and Valero Energy (VLO), which account for ~16.5% of CRAK, have fallen 11% and 16.9%, respectively, since October 19. Apart from the Brent-WTI spread, the contraction in the WTI-WCS (Western Canadian Select) spread might have dragged US downstream stocks. If the Brent-WTI spread moves higher, it could support the fall in these US refining stocks.

What Happened in the Energy Sector Last Week
(Continued from Prior Part)
## Oil-tracking ETFs
Between December 28 and January 4, the United States Oil ETF (USO), United States 12-Month Oil ETF (USL), and ProShares Ultra Bloomberg Crude Oil ETF (UCO) rose 6.8%, 7.4%, and 14%, respectively. These ETFs track US crude oil futures. USO holds active US crude oil futures, while USL holds US crude oil futures deliverable for each of the next 12 months. UCO tracks daily changes in the Bloomberg WTI Crude Oil Subindex.
USO and USL outperformed US crude oil February futures, which rose 5.8% last week. Higher oil prices can boost oil-weighted stocks. California Resources (CRC), Callon Petroleum (CPE), and Denbury Resources (DNR), the strongest oil-weighted stocks, rose 14%, 14%, and 27.3%, respectively, last week.
## Long-term returns and forward curve
Between February 11, 2016, and January 4, 2018, US crude oil active futures rose 83% from their 12-year low. USO, USL, and UCO rose 27.4%, 33.3%, and 13%, respectively.
A negative roll yield, which occurs when expiring futures’ contract prices are lower than the following month’s futures contract prices, may have caused the lower returns. UCO’s actual and expected returns could also be different due to daily price changes. In a cost-of-carry model, ETFs’ underperformance due to negative roll yields reflects storage costs. On January 4, US crude oil futures for delivery next year closed in ascending order, which could be a negative sign for these ETFs’ returns.
Continue to Next Part
Browse this series on Market Realist:
* Part 1 - What Goldman Sachs Thinks about Oil
* Part 2 - Last Week in Review: Energy Outperforms Other Sectors
* Part 3 - Last Week’s Top Energy Stocks

To help investors keep up with the markets, we present our ETF Scorecard. The Scorecard takes a step back and looks at how various asset classes across the globe are performing. The weekly performance is from last Friday’s open to this week’s Thursday close.

US Oil Exports and Downstream Stocks Might RetreatBrent-WTI spread On January 2, Brent crude oil March futures settled at ~$8.37—higher than WTI crude oil February futures. On December 26, the spread was ~$8.

One of the biggest contributors to the large decline in oil prices in recent months is an increase in output in Russia and from U.S. shale producers, John Kilduff, founding partner at Again Capital, told CNBC Wednesday. Investors should look at American E&P companies that offer a 6-7-percent dividend yield, the Again Capital exec said. OPEC Losing Power? OPEC has less control over global oil markets in 2019 than in prior years, Bloomberg's Stuart Wallace said on "Bloomberg Surveillance" Wednesday.

Personally, I think it's the combination of political strife, ongoing trade fear, and higher rates that are hitting the stock market -- not the economy. It seems that even Treasury Secretary Steve Mnuchin making a comment about safe liquidity will set things off in a negative way.

On December 21–28, the United States Oil ETF (USO) and the United States 12-Month Oil ETF (USL) fell 0.4% and 0.3%, respectively. The ProShares Ultra Bloomberg Crude Oil ETF (UCO) fell 2.6%. These ETFs track US crude oil futures.

Bank of America Merrill Lynch (BAML) is overweight on precious metals going into 2019. In its preview for 2019, BAML strategist Michael Widmer and his team noted that the market is close to extremely bearish on the metal. BAML uses four variables to forecast gold prices (GLD)(JNUG): the US dollar (UUP), US real interest rates (TLT), cross-asset volatility (VIX), and oil prices (USO).

Goldman Sachs (GS) turned positive on gold (GLD) for the first time in more than five years back in March. In a report published in March, GS cited an uptick in inflation and increased risk of a stock market correction as the major reasons for the bullish gold price view. This view from GS came despite its hawkish outlook on the Fed’s rate hikes. GS noted that rising volatility (VXX) and a potential for further sell-off in equities make them bullish on gold despite the higher interest rate outlook.

Talk about Plunge Protection! It is rare that we start out with an exclamation point for the market morning report, but yesterday’s action warrants it. In what looked to have been caused by a fiery chariot flying down from the clouds on top of the New York Stock Exchange and slamming the buy orders to […]
The post Market Morning: Equities Go Crazy, Sears Deathbed, Cannabis Taxes Bite appeared first on Market Exclusive.